Back to Course Outlines Ag and Applied Economics/Economics 707
Daniel W. Bromley
Spring 1997
8:30-9:45 W & F
I. OVERVIEW
The central problem to be addressed here is that of the institutional underpinnings of a market
economy or in John R. Commons' terms the "legal foundations of capitalism." My purpose is to give the
student a clear understanding of the institutional preconditions of exchange and contracting among economic
agents.
We start out with a consideration of the "policy problem" in economics. This seems like the obvious
place to start because it is my presumption that students are drawn to economics in general, and appliedeconomics in
particular, because of the expectation that they will learn about economic problems in the human
condition. Moreover, there is the presumption that economics is a powerful analytical aid to the clarification of
choice in the policy arena. This early exploration of the policy problem in economics will consist in a careful
look at the conceptual foundations of modern welfare economics and its empirical counterpart benefit-cost
analysis. The presuppositions and the normative content of benefit-cost analysis, and its pertinence to the
policy problem, will be explored. The logical problems in efficiency and Pareto optimality as economistic
"truth rules" will be studied.
We will then turn our attention to the concept of institutions and of institutionalism in economic
thought and practice. The first part of this section will be concerned with the origins of institutional
economics primarily the influence of John R. Commons. We will then turn to a treatment of the "new
institutional economics" exemplified by the works of Coase, Demsetz, and North. Because institutionalism
originally arose as a skeptical counterweight to classical and neo-classical economics, we will spend some time
on epistemological issues in an effort to understand how economists come to know what we think we know
about behavior and choice. This will provide the opportunity to compare the "old" and the "new" institutional
economics.
The third section of the course will seek to develop a conceptual synthesis between the "old" and the
"new" institutional economics. We will develop this synthesis in the context of rationality, the firm, the
market, and institutional innovation.
A final focus of concern will be the intersection of law and economics with particular reference to
concepts of rights and property rights.
II. EXPECTATIONS
There will be weekly writing assignments (gobbets), one page in length, in which students will
respond to a question or statement distributed during the prior class. These will be distributed each Friday and
they are due the following Wednesday. We will spend the first part of each class on Wednesday discussing the
particular question for that week. These assignments will account for 40 percent of the grade.
Each student will prepare a research paper covering some aspect of economic theory and practice. The
paper will: (1) identify some concept (idea) in economics; (2) discuss and explain the social and economic
context out of which that particular concept arose; and (3) discuss its current role and importance in economic
thought and policy advice. The paper is limited to 15 double-spaced typed pages. The paper will count for 60
percent of the grade.
COURSE OUTLINE
Session 1: Overview
I. THE POLICY PROBLEM
Session 2: Public Policy and Values
Aaron: "Public Policy, Values, and Consciousness"
Weston: "Toward a Better Understanding of the Positive/Normative Distinction in Economics"
Klappholz: "Value Judgments and Economics"
Session 3: The Framing of Policy
Samuels: "The Legal Economic Nexus"
Heilbroner: "Was Schumpeter Right After All?"
Stone: "Causal Stories and the Formation of Policy Agendas"
Session 4: Truth Rules in Economics
Saraydar: "The Conflation of Productivity and Efficiency in Economics
and Economic History"
Mishan: "How Valid Are Economic Evaluations of Allocative Changes?"
Session 5: Policy Analysis: I
Tribe: "Policy Science: Analysis or Ideology"
Bromley: "The Ideology of Efficiency"
Session 6: Policy Analysis: II
Porter and van der Linde: "Toward a New Conception of the Environment- Competitiveness Relationship"
Palmer, Oates, and Portney: "Tightening Environmental Standards: The Benefit-Cost or
the No-Cost Paradigm?"
Arrow, et al.: "Is There a Role for Benefit-Cost Analysis in Environmental, Health, and Safety Regulation?"
Session 7: Review
II. INSTITUTIONAL ECONOMICS: OLD AND NEW
Session 8: Origins of Institutionalism: I
Commons: "Institutional Economics"
Biddle: "Purpose and Evolution in Commons's Institutionalism"
Session 9: Origins of Institutionalism: II
Mayhew: "The Beginnings of Institutionalism"
Neale: "Institutions"
Session 10: Origins of Institutionalism: III
Chasse: "John R. Commons and the Democratic State"
Whalen: "John R. Commons's Institutional Economics: A Re-Examination"
Rutherford: "J. R. Commons's Institutional Economics"
Session 11: The New Institutional Economics
Coase: "The Problem of Social Cost"
Demsetz: "Toward a Theory of Property Rights"
Session 12: Externalities
Samuels: "The Coase Theorem and the Study of Law and Economics"
Dahlman: "The Problem of Externality"
Session 13: On "Efficient" Institutions
North and Thomas: "An Economic Theory of the Growth of the Western World"
North and Thomas: "The Rise and Fall of the Manorial System: A Theoretical Model"
Session 14: A Critique of "Efficient" Institutions
Field: "On the Explanation of Rules Using Rational Choice Models"
Field: "The Problem with Neoclassical Institutional Economics: A Critique with Special Reference to the
North/Thomas Model of Pre-1500 Europe"
Fenoaltea: "The Rise and Fall of a Theoretical Model: The Manorial System"
Session 15: On Nation Building
Bromley: "Reconstituting Economic Systems: Institutions in National Economic Development"
Burawoy: "The State and Economic Involution: Russia Through a China Lens"
Przeworski and Limongi: "Political Regimes and Economic Growth"
Session 16: Review
III. TOWARDS A CONCEPTUAL SYNTHESIS
Session 17: Rationality and Choice
Sen: "Rationality and Social Choice"
Simon: "Rationality in Psychology and Economics"
Stewart: "A Critique of Instrumental Reason in Economics"
Session 18: The Firm
Cheung: "The Contractual Nature of the Firm"
Putterman: "The Firm as Association versus the Firm as Commodity"
Ben-Porath: "The F-Connection: Families, Friends, and Firms and the
Organization of Exchange"
Session 19: Markets
Simon: "Organizations and Markets"
Sen: "Markets and Freedoms: Achievements and Limitations of the Market
Mechanism in Promoting Individual Freedom"
Ramstad: "Is a Transaction a Transaction?"
Session 20: Institutional Change
Bromley: Chapter 2 "On Institutional Change: The Conventional Views"
Bromley: Chapter 3 "The Nature of Institutions"
Bromley: Chapter 5 "Institutional Transactions"
Session 21: Review
IV. LAW AND ECONOMICS: PROPERTY RIGHTS
Session 22: Law and Markets
Hurst: Chapters 1, 2, & 3 Law and Markets in United States History
Wilkins: "The Neglected Intangible Asset: The Influence of the Trade Mark on the Rise of the Modern Corporation"
Session 23: Contracts
Kronman: "Contract Law and the State of Nature"
Goldberg: "Toward an Expanded Economic Theory of Contract"
Lowry: "Bargain and Contract Theory in Law and Economics"
Session 24: Property Rights
Bromley: Chapter 7 "Property Rights and Institutional Change"
Williams: "Kant's Concept of Property"
Perry: "A Paradigm of Philosophy: Hohfeld on Legal Rights"
Session 25: Property and the Courts
Sax: "Some Thoughts on the Decline of Private Property"
Bromley: "Regulatory Takings: Coherent Concept or Logical
Contradiction?"
Session 26: Property and the Legislature
Samuels: "The Interrelations Between Legal and Economic Processes"
Buchanan: "Politics, Property, and the Law: An Alternative Interpretation of Miller et al. v.
Schoene"
Samuels: "In Defense of a Positive Approach to Government as an Economic Variable"
Session 27: Review
Sessions 28, 29, and 30: RESEARCH PAPERS
BIBLIOGRAPHY
(Required readings marked with *)
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